The plant will produce environmentally friendly LCVs and passenger cars, according to PSA.

In a statement, the carmaker said: 'The new JV will complement both parties existing JVs in China, without direct competition.

PSA already runs a plant in Wuhan, the capital city of Hubei province, in a joint venture with Dongfeng Motor Group in China. The site comprises two plants: final assembly plant 1 and final assembly plant 2, and produces models for both group brands, including the Peugeot 207, 307 and forthcoming 408.

PSA also operates its Xiang Fan powertrain site, which is located in the province of Hubei in China.

Chang'an Automotive Group is located in Chongqing and has joint ventures with Suzuki, Ford, Mazda and Jiangling Motors.

PSA said in its statement that its JV with Chang'an will be established in full compliance with the relevant laws and regulations in China.

It added that 'Both parties are currently discussing the details of the project.'